Can You Buy A Home With A 580 Credit Score?

Mortgages For A 580 Credit Score: Available, With A Catch

And it may be frustrating, too, because while the FHA program guidelines allow a 580 credit score, the average FICO score of an approved FHA purchase mortgage is 686, according to analysts at Ellie Mae.

But certain programs today allow you to become a homeowner despite lower credit.

580 Credit Score With FHA

Officially, you can get an FHA home loan with a low credit score. That does not mean that you can get an FHA mortgage with bad credit.

FHA allows you to get a 96.5 percent mortgage with credit scores down to 580, and requires ten percent down with a FICO as low as 500.

However, the reason for your low score cannot be that you have burned creditors right and left.

Low Scores Vs Bad History

FHA guidelines state that, “If a borrower’s credit history, despite adequate income to support obligations, reflects continuous slow payments, judgments, and delinquent accounts, significant compensating factors will be necessary to approve the loan.”

If your 580 FICO is the result of a limited credit history, too many new accounts, or other relatively harmless reason, you can get an FHA home loan if you meet all other requirements.

If your low score is due to bad credit in the distant past, and you’ve been responsible with your payments for at least a year, you may be able to get an FHA mortgage.

FHA instructs lenders, “A period of past financial difficulty does not necessarily make the risk unacceptable, if the borrower has maintained a good payment record for a considerable time period since the financial difficulty occurred.”

However, you will need a bigger downpayment — plan on at least 15 percent if you’re credit is marginal, and more if it’s really stinky.

Plan also on paying higher fees and interest rates. One regional non-prime lender rates start at about six percent (and go up, depending on your profile), and loan fees are about two points higher than FHA mortgage costs.

What Are Today’s FHA Mortgage Rates?

FHA and other mortgage rates are holding fairly steady as of this writing. Of course, the better your credit score, the more lenders you can choose from. That makes it easier to find a great deal.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.